UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 2011
HAEMONETICS CORPORATION
(Exact name of registrant as specified in its charter)
| Massachusetts (State or other jurisdiction of incorporation) |
1-14041 (Commission File Number) |
04-2882273 (I.R.S. Employer Identification No.) |
| 400 Wood Road (Address of principal executive offices) |
02184 (Zip Code) |
Registrant’s telephone number, including area code 781-848-7100
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On October 31, 2011, Haemonetics Corporation (the “Company”) issued a press release announcing
financial results for the second quarter ended October 1, 2011. A copy of the release is furnished
with this report as exhibit 99.1.
The information in this current report on Form 8-K and the exhibit attached hereto shall not be
deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the
“Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act,
regardless of any general incorporation language in such filing.
Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1:
|
Press Release of Haemonetics Corporation dated October 31, 2011 announcing financial results for the second quarter ended October 1, 2011. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HAEMONETICS CORPORATION (Registrant) |
||||
| Date: October 31, 2011 | By: | /s/ Christopher Lindop | ||
| Christopher Lindop, | ||||
| Vice President and Chief Financial Officer |
||||
3
EXHIBIT INDEX
99.1
|
Press Release issued by Haemonetics Corporation on October 31, 2011. |
4
Exhibit 99.1
|
News Release |
FOR RELEASE:
|
CONTACT: | |
Date October 31, 2011
|
Gerry Gould, VP-Investor Relations | |
Time 8:00 am Eastern
|
Tel. (781) 356-9402 | |
| gerry.gould@haemonetics.com Alt. (781) 356-9613 |
Haemonetics Reports 8% Revenue Growth for Second Quarter of Fiscal 2012, Adjusted Earnings Per
Share of $0.72 and Updates Previously Provided Full Year Earnings Guidance
Share of $0.72 and Updates Previously Provided Full Year Earnings Guidance
Braintree, MA, October 31, 2011— Haemonetics Corporation (NYSE: HAE) today reported second quarter
2012 GAAP net revenues of $179.4 million, up 8%, net income of $13.9 million, down 35%, and
earnings per share of $0.54, down 36%. Excluding transformation costs and contingent consideration
income, adjusted second quarter net income was $18.7 million, down 7%, and adjusted earnings per
share was $0.72, down 9%. Excluding currency impacts, net revenue was up 6% in the
quarter.1
Year to date, Haemonetics reported GAAP net revenues of $350.0 million, up 6%, net income of $30.8
million, down 22%, and earnings per share of $1.18, down 23%. Excluding transformation costs and
contingent consideration income, adjusted first half net income was $35.8 million, down 9% and
adjusted earnings per share was $1.37, down 11%. Excluding currency impacts, first half fiscal
2012, net revenue was up
4%.1
Brian Concannon, Haemonetics’ President and CEO, said: “The quality issues with the
OrthoPAT® device recall and HS Core Bowl continued to negatively impact our operating
income and earnings per share in the second quarter. We have determined the root cause for both
products, and remediation and recovery plans are well underway. However, we have now concluded that
we underestimated the costs to remediate and the impact that dealing with the quality issues had on
elements of our business. Our revised guidance fully reflects our learning. We expect to put these
issues behind us by the end of the fiscal year.”
STRATEGIC AND SEGMENT GROWTH HIGHLIGHTS
Haemonetics continues to make progress expanding its business. The Company reported the following
second quarter fiscal 12 highlights:
| • | 14% revenue growth in plasma disposables, as increasing collection volumes drives revenues. | ||
| • | 7% revenue growth in the software business, a key enabler of blood management solutions. | ||
| • | 22% revenue growth in diagnostic disposables products, with rapid uptake by leading US hospitals. | ||
| • | IMPACT® accounts increasing to 226 as more customers embrace the value of blood management. | ||
| • | The OrthoPAT recall remains on track with over 500 devices replaced to date. |
In the quarter Haemonetics reported adjusted gross margin of 50.9%, down 170 basis points, and
adjusted operating margin of 14.2%, down 270 basis points. The Company’s adjusted operating
expenses were $65.8 million, up 10%. Gross and operating margins were significantly impacted by
the recall of OrthoPAT devices. The negative impact on operating results associated with the
OrthoPAT recall and other product quality initiatives was approximately 180 basis points of gross
margin, $4 million of operating earnings or $0.12 per share in the quarter and 170 basis points of
gross margin, $7 million of operating earnings or $0.20 per share year to date.
Mr. Concannon added: “Despite the quality issues, the fundamentals of this business remain
strong. With the exception of OrthoPAT® disposables, where the recall impacted revenues,
we saw continued growth across all other product categories. We continue to see a growing demand
for our products and services as more customers seek economic savings and improved clinical
outcomes using our blood management solutions.”
As noted, in the quarter revenues were $179.4 million, up 8%. A break-down vs. the prior year
quarter follows:
Plasma
Plasma disposables revenue was $64.4 million, up 14%. Momentum continued in Haemonetics’ plasma
business in the quarter following a cyclical adjustment in the commercial Plasma business last
year. Plasma revenues are still being negatively impacted by a change in collection practices in
Japan.
Blood bank
Platelet disposables revenue was $42.2 million, up 6%. Platelet revenues continue to benefit from
strong sales in emerging markets.
Red cell disposables revenue was $11.6 million, up 3%. Red cell revenues grew due to increasing
demand for red cells as the Company leveraged its IMPACT selling approach in the market.
Hospital
Surgical disposables revenue was $16.2 million, up 1%. The Elite® product launch is
expected to accelerate in the second half of fiscal 12. OrthoPAT orthopedic perioperative
autotransfusion system disposables revenue was $7.3 million, down 12% and remains impacted by the
voluntary recall of pre-2002 devices.
Diagnostics revenue was $5.7 million, up 22%. Revenue growth related to the TEG®
Thrombelastograph® Hemostasis Analyzer business was also driven by the Company’s
IMPACT initiative.
Software Solutions revenue was $17.2 million, up 7%. The enhanced offering of software products
for Blood Bank and Hospital customers continues to drive revenue growth.
Equipment and other revenue was $14.8 million, up 4% following a first quarter in which a 13%
decline occurred. Equipment revenues are influenced by the timing of tenders and capital budgets.
Haemonetics reported second quarter fiscal 12 revenue growth in all regions with sales up 10% in
North America, 9% in Japan, 13% in Asia and 1% in Europe.
Cash Flow and Share Repurchase Activity
The Company reported continued strong cash flows. Excluding transformation costs in fiscal 12 and
11 and deal costs in fiscal 11, adjusted first half operating cash flow was $57.1 million, up 8%,
and free cash flow was $33.4 million, up 15%. During the second quarter of fiscal 12, the Company
repurchased approximately 852,400 of its common shares in the open market, completing its
authorized $50 million repurchase program.
Guidance
The company now expects fiscal year 12 revenue growth of 6-7%, slightly above the high end of its
previous guidance range. Plasma is now expected to grow 11-12% and hospital products 0-2% due to
the quality remediation. Full year adjusted gross margin is now expected to approximate 52%,
operating income $110 — $112 million, earnings per share $3.00 — $3.10 and free cash flow in excess
of $70 million.
These new estimates reflect an increase in the estimated full-year impact of the OrthoPAT and HS
Core quality issues. The impact on operating income due to lost sales and gross margin and
increased quality and regulatory expenses, is now expected to be approximately $13 million or $0.37
per share, up from our previous estimate of $9 million or $0.25 per share.
Full year guidance also includes revised estimates of operations cost savings delays and hospital
product sales delays, other than OrthoPAT, enumerated in the table which follows:
$ million, except per share
| Adjusted Operating Income | Adjusted EPS | |||||||||||||||
| Low | High | Low | High | |||||||||||||
Previous Guidance |
$ | 124 | $ | 125 | $ | 3.35 | $ | 3.45 | ||||||||
Cost of quality increase |
(4 | ) | (4 | ) | $ | (0.12 | ) | $ | (0.12 | ) | ||||||
Operations cost savings delays |
(3 | ) | (3 | ) | $ | (0.08 | ) | $ | (0.08 | ) | ||||||
Hospital product sales delays |
(4 | ) | (4 | ) | $ | (0.10 | ) | $ | (0.10 | ) | ||||||
Other, net |
(2 | ) | (2 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||||
Current Guidance |
$ | 110 | $ | 112 | $ | 3.00 | $ | 3.10 | ||||||||
More information on the impact of the cost of quality on our adjusted operating results and our
outlook for the full year can be found on our web site at http://www.haemonetics.com.1
CONFERENCE CALL
Haemonetics will host a webcast on Monday, October 31, 2011 at 10:00 am Eastern to discuss these
results. Interested parties can participate at
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=72118&eventID=4204617
Haemonetics (NYSE: HAE) is a global healthcare company dedicated to providing innovative blood
management solutions for our customers. Together, our devices and consumables, information
technology platforms, and consulting services deliver a suite of business solutions to help our
customers improve clinical outcomes and reduce the cost of healthcare for blood collectors,
hospitals, and patients around the world. Our technologies address important medical markets:
blood and plasma component collection, the surgical suite, and hospital transfusion services. To
learn more about Haemonetics, visit our web site at http://www.haemonetics.com.
This release contains forward-looking statements that involve risks and uncertainties, including
technological advances in the medical field and standards for transfusion medicine and our ability
to successfully implement products that incorporate such advances and standards, product demand,
product quality, market acceptance, regulatory uncertainties, the effect of economic and political
conditions, the impact of competitive products and pricing, blood product reimbursement policies
and practices, foreign currency exchange rates, changes in customers’ ordering patterns, the effect
of industry consolidation as seen in the plasma market, the effect of communicable diseases and the
effect of uncertainties in markets outside the U.S. (including Europe and Asia) in which we operate
and other risks detailed in the Company’s filings with the Securities and Exchange Commission. The
foregoing list should not be construed as exhaustive. The forward-looking statements are based on
estimates and assumptions made by management of the Company and are believed to be reasonable,
though are inherently uncertain and difficult to predict. Actual results and experience could
differ materially from the forward-looking statements. Information set forth in this press release
is current as of today and the Company undertakes no duty or obligation to update this information.
1 A reconciliation of GAAP to adjusted financial results is included at the end
of the financial sections of this press release as well as on the web at
http://www.haemonetics.com. GAAP results include the following items which are excluded from
adjusted results: $8.5 million of pre-tax restructuring and transformation costs and $1.6 million
of contingent consideration income in the second quarter of fiscal 2012; $1.1 million in pre-tax
restructuring and transformation costs and $1.9 million of contingent consideration in the second
quarter of fiscal 2011; $8.9 million of pre-tax restructuring and transformation costs and $1.6
million of contingent consideration income in the first half of fiscal 2012; and $2.9 million in
pre-tax restructuring and integration costs and $1.9 million of contingent consideration in the
first half of fiscal 2011. The second quarter and first half fiscal 2012 pre-tax restructuring and
transformation costs excluded from adjusted financial results include $2.4 million of expenses for
customer claims arising from the HS Core Bowl quality issue. Fiscal 2012 guidance excludes: $13-14
million of planned costs associated with the restructuring of the infrastructure supporting
research, manufacturing and supply chain organizations and the software solutions business; and
inventory write-downs and customer claims arising from the HS Core Bowl quality issue.
Haemonetics Corporation Financial Summary
(Unaudited data in thousands, except per share data)
(Unaudited data in thousands, except per share data)
Consolidated Statements of Income for the Second Quarter of FY12 and FY11
| 10/1/2011 | 10/2/2010 | % Inc/(Dec) | ||||||||||
| As Reported | As Reported | vs Prior Year | ||||||||||
NET REVENUES |
$ | 179,445 | $ | 166,833 | 7.6 | % | ||||||
Gross profit |
89,949 | 87,755 | 2.5 | % | ||||||||
R&D |
10,350 | 7,954 | 30.1 | % | ||||||||
S,G&A |
62,613 | 52,790 | 18.6 | % | ||||||||
Contingent
consideration
income |
(1,580 | ) | (1,894 | ) | (16.6 | %) | ||||||
Operating expenses |
71,383 | 58,850 | 21.3 | % | ||||||||
Operating income |
18,566 | 28,905 | (35.8 | %) | ||||||||
Interest expense |
(17 | ) | (23 | ) | (26.1 | %) | ||||||
Interest income |
749 | 493 | 51.9 | % | ||||||||
Other (expense), net |
(287 | ) | (216 | ) | 32.9 | % | ||||||
Income before taxes |
19,011 | 29,159 | (34.8 | %) | ||||||||
Tax expense |
5,131 | 7,821 | (34.4 | %) | ||||||||
NET INCOME |
$ | 13,880 | $ | 21,338 | (35.0 | %) | ||||||
Net
income per common share assuming dilution |
$ | 0.54 | $ | 0.85 | (36.2 | %) | ||||||
Weighted average number of shares |
||||||||||||
Basic |
25,418 | 24,686 | ||||||||||
Diluted |
25,843 | 25,228 | ||||||||||
| Inc/(Dec) vs | ||||||||||||
| prior year profit | ||||||||||||
| margin % | ||||||||||||
Profit Margins: |
||||||||||||
Gross profit |
50.1 | % | 52.6 | % | (2.5 | %) | ||||||
R&D |
5.8 | % | 4.8 | % | 1.0 | % | ||||||
S,G&A |
34.9 | % | 31.6 | % | 3.3 | % | ||||||
Operating income |
10.3 | % | 17.3 | % | (7.0 | %) | ||||||
Income before taxes |
10.6 | % | 17.5 | % | (6.9 | %) | ||||||
Net income |
7.7 | % | 12.8 | % | (5.1 | %) | ||||||
Consolidated Statements of Income for Year-to-Date FY12 and FY11
| 10/1/2011 | 10/2/2010 | % Inc/(Dec) vs | ||||||||||
| As Reported | As Reported | Prior Year | ||||||||||
NET REVENUES |
$ | 350,014 | $ | 329,872 | 6.1 | % | ||||||
Gross profit |
178,698 | 174,217 | 2.6 | % | ||||||||
R&D |
18,959 | 15,875 | 19.4 | % | ||||||||
S,G&A |
118,844 | 107,144 | 10.9 | % | ||||||||
Contingent consideration
income |
(1,580 | ) | (1,894 | ) | (16.6 | %) | ||||||
Operating expenses |
136,223 | 121,125 | 12.5 | % | ||||||||
Operating income |
42,475 | 53,092 | (20.0 | %) | ||||||||
Interest expense |
(35 | ) | (40 | ) | (12.5 | %) | ||||||
Interest income |
767 | 460 | 66.7 | % | ||||||||
Other (expense)/income, net |
(502 | ) | 22 | (2381.8 | %) | |||||||
Income before taxes |
42,705 | 53,534 | (20.2 | %) | ||||||||
Tax expense |
11,877 | 14,277 | (16.8 | %) | ||||||||
NET INCOME |
$ | 30,828 | $ | 39,257 | (21.5 | %) | ||||||
Net
income per common share assuming dilution |
$ | 1.18 | $ | 1.54 | (23.4 | %) | ||||||
Weighted average number of shares |
||||||||||||
Basic |
25,575 | 24,913 | ||||||||||
Diluted |
26,029 | 25,459 | ||||||||||
| Inc/(Dec) vs | ||||||||||||
| prior year profit | ||||||||||||
| margin % | ||||||||||||
Profit Margins: |
||||||||||||
Gross profit |
51.1 | % | 52.8 | % | (1.7 | %) | ||||||
R&D |
5.4 | % | 4.8 | % | 0.6 | % | ||||||
S,G&A |
34.0 | % | 32.5 | % | 1.5 | % | ||||||
Operating income |
12.1 | % | 16.1 | % | (4.0 | %) | ||||||
Income before taxes |
12.2 | % | 16.2 | % | (4.0 | %) | ||||||
Net income |
8.8 | % | 11.9 | % | (3.1 | %) | ||||||
Revenue Analysis for the Second Quarter and Year-To-Date FY12 and FY11
| Three Months Ended | ||||||||||||
| 10/1/2011 | 10/2/2010 | % Inc/(Dec) vs | ||||||||||
| As Reported | As Reported | Prior Year | ||||||||||
Revenues by geography |
||||||||||||
United States |
$ | 86,339 | $ | 78,740 | 9.7 | % | ||||||
International |
93,106 | 88,093 | 5.7 | % | ||||||||
Net revenues |
179,445 | 166,833 | 7.6 | % | ||||||||
Disposable revenues |
||||||||||||
Plasma disposables |
64,408 | 56,514 | 14.0 | % | ||||||||
Blood bank disposables |
||||||||||||
Platelet |
42,195 | 39,746 | 6.2 | % | ||||||||
Red cell |
11,645 | 11,294 | 3.1 | % | ||||||||
| 53,840 | 51,040 | 5.5 | % | |||||||||
Hospital disposables |
||||||||||||
Surgical |
16,206 | 16,011 | 1.2 | % | ||||||||
OrthoPAT |
7,295 | 8,281 | (11.9 | %) | ||||||||
Diagnostics |
5,659 | 4,647 | 21.8 | % | ||||||||
| 29,160 | 28,939 | 0.8 | % | |||||||||
Subtotal |
147,408 | 136,493 | 8.0 | % | ||||||||
Software solutions |
17,199 | 16,125 | 6.7 | % | ||||||||
Equipment & other |
14,838 | 14,215 | 4.4 | % | ||||||||
Net revenues |
$ | 179,445 | $ | 166,833 | 7.6 | % | ||||||
| Six Months Ended | ||||||||||||
| 10/1/2011 | 10/2/2010 | % Inc/(Dec) vs | ||||||||||
| As Reported | As Reported | Prior Year | ||||||||||
Revenues by geography |
||||||||||||
United States |
$ | 172,734 | $ | 158,049 | 9.3 | % | ||||||
International |
177,280 | 171,823 | 3.2 | % | ||||||||
Net revenues |
350,014 | 329,872 | 6.1 | % | ||||||||
Disposable revenues |
||||||||||||
Plasma disposables |
127,168 | 112,431 | 13.1 | % | ||||||||
Blood bank disposables |
||||||||||||
Platelet |
79,504 | 76,063 | 4.5 | % | ||||||||
Red cell |
23,514 | 22,608 | 4.0 | % | ||||||||
| 103,018 | 98,671 | 4.4 | % | |||||||||
Hospital disposables |
||||||||||||
Surgical |
31,948 | 32,362 | (1.3 | %) | ||||||||
OrthoPAT |
15,049 | 17,238 | (12.7 | %) | ||||||||
Diagnostics |
11,273 | 9,355 | 20.5 | % | ||||||||
| 58,270 | 58,955 | (1.2 | %) | |||||||||
Subtotal |
288,456 | 270,057 | 6.8 | % | ||||||||
Software solutions |
35,359 | 32,585 | 8.5 | % | ||||||||
Equipment & other |
26,199 | 27,230 | (3.8 | %) | ||||||||
Net revenues |
$ | 350,014 | $ | 329,872 | 6.1 | % | ||||||
Consolidated Balance Sheets
| Period ending | ||||||||
| 10/1/2011 | 4/2/2011 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 183,421 | $ | 196,707 | ||||
Accounts receivable, net |
129,242 | 127,166 | ||||||
Inventories, net |
101,444 | 84,387 | ||||||
Other current assets |
26,993 | 40,571 | ||||||
Total current assets |
441,100 | 448,831 | ||||||
Net PP&E |
156,866 | 155,528 | ||||||
Other assets |
225,756 | 228,905 | ||||||
Total assets |
$ | 823,722 | $ | 833,264 | ||||
| Period ending | ||||||||
| 10/1/11 | 4/2/11 | |||||||
Liabilities & Stockholders’ Equity |
||||||||
Short term debt & current maturities |
$ | 3,080 | $ | 913 | ||||
Other current liabilities |
107,726 | 107,758 | ||||||
Total current liabilities |
110,806 | 108,671 | ||||||
Long-term debt |
3,332 | 3,966 | ||||||
Other long-term liabilities |
31,307 | 34,491 | ||||||
Stockholders’ equity |
678,277 | 686,136 | ||||||
Total liabilities & stockholders’ equity |
$ | 823,722 | $ | 833,264 | ||||
Free Cash Flow Reconciliation
| Three Months Ended | ||||||||
| 10/1/2011 | 10/2/2010 | |||||||
GAAP cash flow from operations |
$ | 25,408 | $ | 30,730 | ||||
Capital expenditures |
(12,042 | ) | (8,864 | ) | ||||
Proceeds from sale of property, plant and equipment |
111 | 151 | ||||||
Net investment in property, plant and equipment |
(11,931 | ) | (8,713 | ) | ||||
Free cash flow after transformation and deal costs |
13,477 | 22,017 | ||||||
Transformation and deal costs |
2,807 | 2,325 | ||||||
| 2,807 | 2,325 | |||||||
Free cash flow before transformation and deal costs |
$ | 16,284 | $ | 24,342 | ||||
| Six Months Ended | ||||||||
| 10/1/2011 | 10/2/2010 | |||||||
GAAP cash flow from operations |
$ | 52,539 | $ | 44,286 | ||||
Capital expenditures |
(23,843 | ) | (24,088 | ) | ||||
Proceeds from sale of property, plant and equipment |
130 | 262 | ||||||
Net investment in property, plant and equipment |
(23,713 | ) | (23,826 | ) | ||||
Free cash flow |
28,826 | 20,460 | ||||||
Transformation and deal costs |
4,585 | 6,383 | ||||||
Global Med employment contracts |
— | 2,122 | ||||||
| 4,585 | 8,505 | |||||||
Free cash flow before transformation and deal costs |
$ | 33,411 | $ | 28,965 | ||||
Haemonetics Corporation Financial Summary
Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures
Haemonetics has presented supplemental non-GAAP financial measures as part of this earnings
release. A reconciliation is provided below that reconciles each non-GAAP financial measure with
the most comparable GAAP measure. The presentation of non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, the most directly comparable GAAP measures.
There are material limitations to the usefulness of non-GAAP measures on a standalone basis,
including the lack of comparability to the GAAP financial results of other companies.
These measures are used by management to monitor the financial performance of the business, inform
business decision making, and forecast future results. Performance targets for management are
established based upon these non-GAAP measures. In the reconciliations below, we have removed
restructuring and transformation costs from our GAAP expenses. Our restructuring and
transformation costs are principally related to HS Core customer related expenses, restructuring of
certain departments and the disposal of a product line. We believe this information is useful for
investors because it allows for an evaluation of the Company with a focus on the performance of our
core operations.
Non-GAAP Gross Profit
The use of these non-GAAP measures allows management to monitor the level of total gross profits
without the costs of our business transformation. We establish our budgets, forecasts, and
performance targets on this basis.
Non-GAAP S,G&A and Non-GAAP Operating Expenses
The use of this non-GAAP measure allows management to monitor the ongoing level of spend that is
necessary to support the business in a period when we are not transforming our business or
completing an acquisition of in-process research and development. We establish our budgets,
forecasts, and performance targets excluding these costs.
Non-GAAP Operating Income and Non-GAAP Income before Income Taxes
The use of these non-GAAP measures allows management to monitor the level of operating and total
pre-tax profits without the costs of our business transformation. We establish our budgets,
forecasts, and performance targets on this basis.
Non-GAAP Net Income and Earnings per Share
The use of these non-GAAP measures allows management to monitor the level of net income and
earnings per share excluding both the costs of our business transformation, as well as any related
tax effects. We establish our budgets, forecasts, and performance targets on this basis.
Reconciliation of Non-GAAP Measures for the Second Quarter of FY12 and FY11
| Three Months Ended | ||||||||
| 10/1/2011 | 10/2/2010 | |||||||
Non-GAAP gross profit |
||||||||
GAAP gross profit |
$ | 89,949 | $ | 87,755 | ||||
Restructuring and transformation costs |
1,381 | — | ||||||
Non-GAAP gross profit |
$ | 91,330 | $ | 87,755 | ||||
Non-GAAP R&D |
||||||||
GAAP R&D |
$ | 10,350 | $ | 7,954 | ||||
Restructuring and transformation costs |
(1,356 | ) | — | |||||
Non-GAAP R&D |
$ | 8,994 | $ | 7,954 | ||||
Non-GAAP S,G&A |
||||||||
GAAP S,G&A |
$ | 62,613 | $ | 52,790 | ||||
Restructuring and transformation costs |
(5,792 | ) | (1,120 | ) | ||||
Non-GAAP S,G&A |
$ | 56,821 | $ | 51,670 | ||||
Non-GAAP operating expenses |
||||||||
GAAP operating expenses |
$ | 71,383 | $ | 58,850 | ||||
Restructuring and transformation costs |
(7,148 | ) | (1,120 | ) | ||||
Contingent consideration income |
1,580 | 1,894 | ||||||
Non-GAAP operating expenses |
$ | 65,815 | $ | 59,624 | ||||
Non-GAAP operating income |
||||||||
GAAP operating income |
$ | 18,566 | $ | 28,905 | ||||
Restructuring and transformation costs |
8,529 | 1,120 | ||||||
Contingent consideration income |
(1,580 | ) | (1,894 | ) | ||||
Non-GAAP operating income |
$ | 25,515 | $ | 28,131 | ||||
Non-GAAP income before taxes |
||||||||
GAAP income before taxes |
$ | 19,011 | $ | 29,159 | ||||
Restructuring and transformation costs |
8,529 | 1,120 | ||||||
Contingent consideration income |
(1,580 | ) | (1,894 | ) | ||||
Non-GAAP income before taxes |
$ | 25,960 | $ | 28,385 | ||||
Non-GAAP net income |
||||||||
GAAP net income |
$ | 13,880 | $ | 21,338 | ||||
Restructuring and transformation costs |
8,529 | 1,120 | ||||||
Contingent consideration income |
(1,580 | ) | (1,894 | ) | ||||
Tax benefit associated with non-GAAP items |
(2,164 | ) | (467 | ) | ||||
Non-GAAP net income |
$ | 18,665 | $ | 20,097 | ||||
Non-GAAP net income per common share assuming dilution |
||||||||
GAAP net income per common share assuming dilution |
$ | 0.54 | $ | 0.85 | ||||
Non-GAAP items after tax per common share assuming dilution |
$ | 0.18 | $ | (0.05 | ) | |||
Non-GAAP net income per common share assuming dilution |
$ | 0.72 | $ | 0.80 | ||||
Presented below are additional Constant Currency performance measures. We measure different
components of our business at constant currency. We believe this information is useful for
investors because it allows for an evaluation of the Company without the effect of changes in
foreign exchange rates. These results convert our local foreign currency operating results to the
US Dollar at constant exchange rates of $1.20 per Euro, and 110 Yen to the $1.00. They also
exclude the results of our foreign currency hedging program described in Note 7 to our consolidated
financial statements in our Form 10-K.
Non-GAAP revenues |
||||||||
GAAP revenue |
$ | 179,445 | $ | 166,833 | ||||
Foreign currency effects |
(13,544 | ) | (9,736 | ) | ||||
Non-GAAP revenue — constant currency |
$ | 165,901 | $ | 157,097 | ||||
Non-GAAP net income |
||||||||
Non-GAAP net income, adjusted for restructuring,
transformation costs and contingent consideration
income |
$ | 18,665 | $ | 20,097 | ||||
Foreign currency effects |
(3,213 | ) | (3,799 | ) | ||||
Income tax associated with foreign currency effects |
903 | 1,112 | ||||||
Non-GAAP net income — constant currency |
16,355 | 17,410 | ||||||
Non-GAAP net income per common share assuming dilution |
||||||||
Non-GAAP net income per common share assuming
dilution, adjusted for restructuring, transformation
costs and contingent consideration income |
$ | 0.72 | $ | 0.80 | ||||
Foreign currency effects after tax per common share
assuming dilution |
$ | (0.09 | ) | $ | (0.11 | ) | ||
Non-GAAP net income per common share assuming
dilution — constant currency |
$ | 0.63 | $ | 0.69 | ||||
Reconciliation of Non-GAAP Measures for FY12 and FY11
| Six Months Ended | ||||||||
| 10/1/2011 | 10/2/2010 | |||||||
Non-GAAP gross profit |
||||||||
GAAP gross profit |
$ | 178,698 | $ | 174,217 | ||||
Restructuring and transformation costs |
1,381 | — | ||||||
Non-GAAP gross profit |
$ | 180,079 | $ | 174,217 | ||||
Non-GAAP R&D |
||||||||
GAAP R&D |
$ | 18,959 | $ | 15,875 | ||||
Restructuring and transformation costs |
(1,356 | ) | — | |||||
Non-GAAP R&D |
$ | 17,603 | $ | 15,875 | ||||
Non-GAAP S,G&A |
||||||||
GAAP S,G&A |
$ | 118,844 | $ | 107,144 | ||||
Restructuring and transformation costs |
(6,129 | ) | (2,863 | ) | ||||
Non-GAAP S,G&A |
$ | 112,715 | $ | 104,281 | ||||
Non-GAAP operating expenses |
||||||||
GAAP operating expenses |
$ | 136,223 | $ | 121,125 | ||||
Restructuring and transformation costs |
(7,485 | ) | (2,863 | ) | ||||
Contingent consideration income |
1,580 | 1,894 | ||||||
Non-GAAP operating expenses |
$ | 130,318 | $ | 120,156 | ||||
Non-GAAP operating income |
||||||||
GAAP operating income |
$ | 42,475 | $ | 53,092 | ||||
Restructuring and transformation costs |
8,865 | 2,863 | ||||||
Contingent consideration income |
(1,580 | ) | (1,894 | ) | ||||
Non-GAAP operating income |
$ | 49,760 | $ | 54,061 | ||||
Non-GAAP income before taxes |
||||||||
GAAP income before taxes |
$ | 42,705 | $ | 53,534 | ||||
Restructuring and transformation costs |
8,865 | 2,863 | ||||||
Contingent consideration income |
(1,580 | ) | (1,894 | ) | ||||
Non-GAAP income before taxes |
$ | 49,990 | $ | 54,503 | ||||
Non-GAAP net income |
||||||||
GAAP net income |
$ | 30,828 | $ | 39,257 | ||||
Restructuring and transformation costs |
8,865 | 2,863 | ||||||
Contingent consideration income |
(1,580 | ) | (1,894 | ) | ||||
Tax benefit associated with non-GAAP items |
(2,350 | ) | (1,067 | ) | ||||
Non-GAAP net income |
$ | 35,763 | $ | 39,159 | ||||
Non-GAAP net income per common share assuming dilution |
||||||||
GAAP net income per common share assuming dilution |
$ | 1.18 | $ | 1.54 | ||||
Non-GAAP items after tax per common share assuming dilution |
$ | 0.19 | $ | (0.00 | ) | |||
Non-GAAP net income per common share assuming dilution |
$ | 1.37 | $ | 1.54 | ||||
Presented below are additional Constant Currency performance measures. We measure different
components of our business at constant currency. We believe this information is useful for
investors because it allows for an evaluation of the Company without the effect of changes in
foreign exchange rates. These results convert our local foreign currency operating results to the
US Dollar at constant exchange rates of $1.20 per Euro, and 110 Yen to the $1.00. They also
exclude the results of our foreign currency hedging program described in Note 7 to our consolidated
financial statements in our Form 10-K.
Non-GAAP revenues |
||||||||
GAAP revenue |
$ | 350,014 | $ | 329,872 | ||||
Foreign currency effects |
(24,607 | ) | (16,419 | ) | ||||
Non-GAAP revenue — constant currency |
$ | 325,407 | $ | 313,453 | ||||
Non-GAAP net income |
||||||||
Non-GAAP net income, adjusted for restructuring,
transformation costs and contingent consideration
income |
$ | 35,763 | $ | 39,159 | ||||
Foreign currency effects |
(6,416 | ) | (7,087 | ) | ||||
Income tax associated with foreign currency effects |
1,827 | 1,999 | ||||||
Non-GAAP net income — constant currency |
31,174 | 34,071 | ||||||
Non-GAAP net income per common share assuming dilution |
||||||||
Non-GAAP net income per common share assuming
dilution, adjusted for restructuring, transformation
costs and contingent consideration income |
$ | 1.37 | $ | 1.54 | ||||
Foreign currency effects after tax per common share
assuming dilution |
$ | (0.18 | ) | $ | (0.20 | ) | ||
Non-GAAP net income per common share assuming
dilution — constant currency |
$ | 1.19 | $ | 1.34 | ||||